Virgin extends its reach with Tower

Virgin Money has signed a seven-year deal with life insurer
Tower Australia
to provide online Virgin-branded life products.

It is the high-profile Virgin group’s second push into the local financial services market.

Virgin Money Life Insurance is expected to be launched with a major television advertising campaign in the first quarter of next year under an initial agreement with Tower for seven years and an option to extend.

Tower Australia, which raised $96 million last year from investors to fund growth opportunities, also provides life insurance on an exclusive basis for other organisations under its own name, such as AustralianSuper, the nation’s largest industry super fund.

Tower managing director
Jim Minto
, who negotiated with Virgin for 11 months, said Virgin’s mass appeal would extend Tower’s reach into new markets rather than compete with its self-branded products.

“We’ve not had something on this scale before," Mr Minto said. “Normally launches involve mainstream companies but this is a major international brand launching into life insurance in Australia."

It’s the second stage of a push by Virgin and its founder, Sir
Richard Branson
, into the Australian financial services sector, with a product range that covers general and life insurance, superannuation and banking products.

The first stage, which involved a Westpac Banking Corp-backed credit card, did not include offering a stand-alone life insurance product.

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The managing director of Virgin Money in Australia, Matt Baxby, said it was another step in its strategy to offer a wide range of financial services products using its high-profile brand and marketing.

Only 5 per cent of Australian families have adequate life cover, which is estimated to be equivalent to 10 times annual taxable earnings, according to industry research.

The number of insurers has declined during the past decade from about 50 to 30. The bulk are Australian companies, subsidiaries of US companies, or from Europe and the UK, according to research.

The top three life insurers, AMP, National Australia Bank and ANZ Banking Group, account for nearly 70 per cent of total assets and total premiums received.

Mr Minto would not disclose the terms of the partnership with Virgin other than saying that the underlying profit and earnings per share would be negligible over 2011. After then it is expected to grow in line with group profits.

Tower will provide the infrastructure, product and call centre and both parties to the agreement will work on the marketing.

“The reality is Virgin Money appeals to different people for different reasons," Mr Minto said.

“Tower’s life insurance products will not be targeting the same customers."

Virgin’s car insurance, which it undertakes with Auto & General Insurance, is an online product that competes on price, with premiums typically up to 30 per cent cheaper than some of its mainstream rivals.

The managing director of research group DEXX&R, Mark Kachor, said: “Virgin Money has, so far, been flying under everyone’s radar. It has had exposure through its credit card but superannuation has been a hard market to crack."